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Explaining the housing markets ‘reverse ripple’ post-Brexit

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Once the referendum votes were counted in June we expected it to have an effect on the housing market, and things have played out exactly as expected. Before Brexit, housing prices have been steadily increasing and this trend started in London, before it rippled out into the south east and then nationwide.

Since we left the EU, this ripple effect has reversed as the property market has stagnated but the areas around London are seeing more of a revival than the capital itself – according to estate agent Haart. There is no usual ‘London first’ pattern here, areas 100 miles away from the capital are experiencing growth before this ripples back.

The east and south east are faring best, in fact compared to the rest of the market they expect to enjoy a 2% increase in property prices compared to 0% for the rest of the country – according to estate agent Savills.

So, why has this happened? And will it change any time soon?

The pound’s drastic fall from grace has contributed significantly to the disruption in the housing market. People are less likely to take risk, and with London properties being sold for such huge asking prices British investors are moving away. Foreign investors have swooped in on such an opportunity, snapping up property and accounting for 78 per cent of commercial purchases in London in recent months. £695m of Asian capital has been deployed in London since June and £482m has been invested by European investors.

In June 2016, the number of UK residential transactions actually dropped from 60,000 to less than 30,000, suggesting a real lack of confidence in the economic state of the country. This number has risen since but house buyers are still reluctant to risk it all on properties that aren’t guaranteed good investments.

Land acquisitions specialists and property developments such as First Urban, led by Jason Harris, are still leasing and selling areas to be built on, which can provide real opportunity for home owners and communities to thrive. The Government’s policies on new builds have changed in the past couple of years, the Mortgage Guarantee scheme is ending this year for example, and so there needs to be more thought around what is going to be introduced to replace it. Without these, the property market could stagnate further as people are less reluctant to part with their money.

The reverse ripple has occurred as a backlash from the Brexit result. However, it is still early days and action has still not been taken in regards to Article 50 or a clear plan for the country. The pound has risen since its initial crash but the housing market is essentially in turmoil, as we wait to see what the future holds for Britain and its economy.